class: title-slide <br> <br> <br> .center[.large[ **The Limits of Market-Making**]] .Small[ .center[ *SIWG Presentation <br> Florence - 15 March 2023*] .center[<strong> Luuk Schmitz </strong> (European University Institute)] ] <br> <br> <br> <br> <br> .small[ .center[ <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:currentColor;overflow:visible;position:relative;"><path d="M352 256c0 22.2-1.2 43.6-3.3 64H163.3c-2.2-20.4-3.3-41.8-3.3-64s1.2-43.6 3.3-64H348.7c2.2 20.4 3.3 41.8 3.3 64zm28.8-64H503.9c5.3 20.5 8.1 41.9 8.1 64s-2.8 43.5-8.1 64H380.8c2.1-20.6 3.2-42 3.2-64s-1.1-43.4-3.2-64zm112.6-32H376.7c-10-63.9-29.8-117.4-55.3-151.6c78.3 20.7 142 77.5 171.9 151.6zm-149.1 0H167.7c6.1-36.4 15.5-68.6 27-94.7c10.5-23.6 22.2-40.7 33.5-51.5C239.4 3.2 248.7 0 256 0s16.6 3.2 27.8 13.8c11.3 10.8 23 27.9 33.5 51.5c11.6 26 21 58.2 27 94.7zm-209 0H18.6C48.6 85.9 112.2 29.1 190.6 8.4C165.1 42.6 145.3 96.1 135.3 160zM8.1 192H131.2c-2.1 20.6-3.2 42-3.2 64s1.1 43.4 3.2 64H8.1C2.8 299.5 0 278.1 0 256s2.8-43.5 8.1-64zM194.7 446.6c-11.6-26-20.9-58.2-27-94.6H344.3c-6.1 36.4-15.5 68.6-27 94.6c-10.5 23.6-22.2 40.7-33.5 51.5C272.6 508.8 263.3 512 256 512s-16.6-3.2-27.8-13.8c-11.3-10.8-23-27.9-33.5-51.5zM135.3 352c10 63.9 29.8 117.4 55.3 151.6C112.2 482.9 48.6 426.1 18.6 352H135.3zm358.1 0c-30 74.1-93.6 130.9-171.9 151.6c25.5-34.2 45.2-87.7 55.3-151.6H493.4z"/></svg> [www.luukschmitz.com](https://www.luukschmitz.com) | <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:#1D9BF0;overflow:visible;position:relative;"><path d="M459.37 151.716c.325 4.548.325 9.097.325 13.645 0 138.72-105.583 298.558-298.558 298.558-59.452 0-114.68-17.219-161.137-47.106 8.447.974 16.568 1.299 25.34 1.299 49.055 0 94.213-16.568 130.274-44.832-46.132-.975-84.792-31.188-98.112-72.772 6.498.974 12.995 1.624 19.818 1.624 9.421 0 18.843-1.3 27.614-3.573-48.081-9.747-84.143-51.98-84.143-102.985v-1.299c13.969 7.797 30.214 12.67 47.431 13.319-28.264-18.843-46.781-51.005-46.781-87.391 0-19.492 5.197-37.36 14.294-52.954 51.655 63.675 129.3 105.258 216.365 109.807-1.624-7.797-2.599-15.918-2.599-24.04 0-57.828 46.782-104.934 104.934-104.934 30.213 0 57.502 12.67 76.67 33.137 23.715-4.548 46.456-13.32 66.599-25.34-7.798 24.366-24.366 44.833-46.132 57.827 21.117-2.273 41.584-8.122 60.426-16.243-14.292 20.791-32.161 39.308-52.628 54.253z"/></svg> [@Luukschmitz](https://twitter.com/Luukschmitz) | <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:#5D50E7;overflow:visible;position:relative;"><path d="M433 179.11c0-97.2-63.71-125.7-63.71-125.7-62.52-28.7-228.56-28.4-290.48 0 0 0-63.72 28.5-63.72 125.7 0 115.7-6.6 259.4 105.63 289.1 40.51 10.7 75.32 13 103.33 11.4 50.81-2.8 79.32-18.1 79.32-18.1l-1.7-36.9s-36.31 11.4-77.12 10.1c-40.41-1.4-83-4.4-89.63-54a102.54 102.54 0 0 1-.9-13.9c85.63 20.9 158.65 9.1 178.75 6.7 56.12-6.7 105-41.3 111.23-72.9 9.8-49.8 9-121.5 9-121.5zm-75.12 125.2h-46.63v-114.2c0-49.7-64-51.6-64 6.9v62.5h-46.33V197c0-58.5-64-56.6-64-6.9v114.2H90.19c0-122.1-5.2-147.9 18.41-175 25.9-28.9 79.82-30.8 103.83 6.1l11.6 19.5 11.6-19.5c24.11-37.1 78.12-34.8 103.83-6.1 23.71 27.3 18.4 53 18.4 175z"/></svg> [@luukschmitz@mastodon.online](https://mastodon.online/@luukschmitz)]] --- name: contents-slide <br> .Small[ >‘One thing will **definitely not occur** […]: **a repetition of subsidizing industrial policies** which have already failed in the individual countries’ (Martin Bangemann, 1992: 19) <br> >‘In the end, the **supporters** of an [EU] **industrial policy** were effectively **beaten back**’ (Leon Brittan, 2000) <br> >‘If Europe still wants to be a manufacturing powerhouse in 2030, **we need a genuine European industrial policy**. […] it’s what will give Europe its **economic sovereignty** and **independence.**’ (BMWE & MEDF 2019) <br> >‘After the “Europe of democracy” and the “Europe of the market”, let us now pave the way for a “**Europe of power**”’ (Thierry Breton, 2022) <br> >‘You cannot fall in love with the single market’ (Jaques Delors, 1989: 5) ] --- name: part1 class: inverse, center, middle ## EU Industrial Policy: After Market Making --- ## The argument .pull-left[.Small[ **What explains the emergence of statist policies in a polity that is made up of anti-statist institutions?** - Changed global context has exposed the limits of market-making - A fear of falling behind triggers episodes of industrial policymaking - Scope of response determined by political dilemmas and institutional capacity ]] .top[ .pull-right[ <img src="data:image/png;base64,#thesis.jpg" width="95%" style="display: block; margin: auto;" /> ]] --- ## Four contributions .pull-left[ - The role of the state in the design and direction of markets in the 21st century - The centrality of global dynamics for the European project - Institutional change in Europe - The politics of EU industrial policy ] .pull-right[ <img src="data:image/png;base64,#fork.png" width="90%" style="display: block; margin: auto;" /> ] --- name: part2 class: inverse, center, middle # What are the limits of market-making? --- ## Geopolitics .pull-left[.small[ The reliance on open markets only goes as high as the lowest common denominator Two trends: 1. Increase in subsidies and trade restrictions since 2008 2. Supply-chain disruptions since the Covid-19 pandemic > ‘While our global industrial competitors get billions in subsidies, our bureaucracy is led by political leaders – Mr Almunia is a political leader – who have not understood that the world has changed. It is like Rome surrounded by the barbarians. We all await the fall of Rome. It’s not funny’. (Arnaud Montebourg, 2014) **It has led to the fusion of economic interest and national security** ]] .pull-right[ <img src="data:image/png;base64,#economist.png" width="65%" style="display: block; margin: auto;" /> ] --- ## Twin Transitions .pull-left[ Increased attention of two key market failures: 1. The lack of progress in digitalization, innovation, and cutting edge technologies 2. Structural inability of markets to unwind highly profitable but polluting lines of business **It has led to an expansion of what can be seen as market failure** ] .pull-right[ >‘Leading the twin transition in this changing world is the driving force of this Commission. This is our generational task and opportunity’ (Ursula von der Leyen, 2020) <img src="data:image/png;base64,#tech.png" width="95%" style="display: block; margin: auto;" /> ] --- ## Constraining macro-economic governance Long-term changes (energy markets, digitalization, possible reshoring/nearshoring, demographic ageing) all call for massive public investment. Until recently, macro-economic governance in the EU was not conducive for any such ambition. On the contrary, the micro-management of business activity and reallocation of resources between economic sectors (i.e. industrial policy) was pacified with disciplinary state aid & fiscal rules. <br> Nowadays, we see a **repoliticization of micro-management**, and a turn to **more conducive macro-economic governance**. --- name: part3 class: inverse, center, middle # Three dilemmas of supranational economic governance --- ## Redistribution-Efficiency .pull-left[ Achieving short-term aims versus long-term economic goals But possible without distorting the single market or not? ] .pull-right[ <img src="data:image/png;base64,#Rplot.svg" width="95%" style="display: block; margin: auto;" /> ] --- ## Competence-Control <br> <br> <br> <br> <img src="data:image/png;base64,#cc.png" width="75%" style="display: block; margin: auto;" /> --- ## Inward/outward-looking .pull-left[ Not all demands for support are created equally. Significant conflict exists between business, interest groups, and member states; specifically: - A rift between demand for inward and outward-looking measures - 'Neoliberal' versus 'neo-mercantilist' actors] .pull-right[ <img src="data:image/png;base64,#jcms13428-fig-0001-m.jpg" width="90%" style="display: block; margin: auto;" /> ] --- ## Conclusion: the growing pains of an EU industrial policy A remarkable turnaround in the direction of EU economic governance has unfolded - This is based on a changing world and a fear of falling behind Industrial policy is becoming *supranational* and *market-directing* Measures take a conspicuous shape by relying on unused treaty flexibility, due to: - Limits of administrative capacity - Politicization of a more full-fledged EU industrial policy Policies lack political legitimacy, but Eurosceptic countries hold the keys (arguably) --- class: inverse, center, middle ## Thank You!